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I want to lower my 30% APR on my unsecured credits cards and expedite payment of my credit card debts; but I am told by the banks that they will go as low as 6% for 12 months or 0% for 5 years, so long as I agree to enter into a one of these payment arrangements and close my credit card accounts - How will entering into ashort- or long-term payment arrangement and closing my credit card accounts impact my credit score? Also, in this case, is the account being technically closed by me or by the bank? Does that distinction matter?
Hi Sunil,
If you have balance remaining and you close the credit account, it will be listed on your credit report as "Closed" but carrying a balance. This will have a negative impact on your credit records. Potential creditors will think that you are not responsible in paying off your credit accounts. Closing the credit accounts will also shorten the length of your credit history, that can adversely affect your score.
Also, in this case, is the account being technically closed by me or by the bank? Does that distinction matter?
Whether an account has been closed by you or your creditor, it definitely matters. If an account is listed on your report as being closed by your bank, when you apply for credit in future, creditors will think you had negative payment records with that particular account (maybe missed payment many times or went over the limit).
I would suggest that if you are in a hurry to pay off your debts, you can accept the payment plan that offers 6% interest rate for 12 months.
do repayment plans affect my credit score
if each debt has been arranged with a repayment plan, will this be added to my credit score and make it better?